Evironment factors for foreign direct investment for american business corporation in three main commercial centers of vietnam

PREFACE
In order to attract efficiently US FDI, Vietnam requires more improvement of investment
environment which is more and more increasingly attractive and competitive compared with
other countries in the region. The title of:
“ENVIRONMENT FACTORS FOR FOREIGN DIRECT INVESTMENT FOR AMERICAN BUSINESS
CORPORATION IN THREE MAIN COMMERCIAL CENTERS OF VIETNAM”
is a research on 63 US investor enterprises, 30 state management agencies and 99 FDI
experts was carried out in three main commercial centers of Vietnam (Hanoi, Da Nang, Ho Chi
Minh city) to find advantage and/or disadvantage of sub-factors of investment environment in
Vietnam, then providing some prospective solutions for investment environment improvement in
coming years.
Chapter 1
INTRODUCTION
Background of the Study
The FDI is significant capital and technical source of economic growth. This is also
characteristic clearly of globalization. Beside that FDI is not only providing of investment capital
and technology, it is also providing of managerial and technological skills, job creation,
infrastructure upgrading for host country. In Vietnam, FDI is an important source to help
restructure and increase the competitiveness of the economy since the middle of 1980s when
Vietnam began to apply new ecomomic mechanism called as “Doi Moi” and known as “open-door
policy”. FDI has become an important factor of economy of Vietnam in the context of deep
integration with the world economy and globalization trends.
Statement of the Problem
This study shall answer for following questions:
1. How does political environment of Vietnam affects to the US. FDI attraction?
2. How does governmental administrative environment of Vietnam affects to the US. FDI
attraction ?
3. How does infrastructure- location factor of Vietnam affects to the US. FDI attraction ?
4. How does economic and financial mechanism of Vietnam affects to the US. FDI
attraction?
5. How does labor factor of Vietnam affect to the US. FDI attraction ?

Objectives
The aim of the Dissertation was to assess the situation of FDI attraction from the United
States into Vietnam, then to indicate existing shortcoming, in particularly investment
environment limitation that interfere U.S FDI flows into Vietnam and finally to provide
solutions to further improvement of investment environment for U.S FDI attraction and
disbursement process in Vietnam.
Hypothesis
H1. Stable political environment is factor to attract more FDI


H2. Convenient, simple and prompt administrative procedure in registering shall attract
more foreign investors
H3. Advantage of infrastructure- location is factor to determine FDI
H4. Openness of economic and financial mechanism is incentive for FDI
H5. High qualification and skill labor force is factor to attract FDI in host country
In order to research above factor relationship the author also assumed that total registered
FDI is equal to total effectuate FDI and there is no conversion between investment form and no
transfer of FDI projects between investment countries or regions.
Scope and limitation of study
The Dissertation focuses on studying investment environment for attracting FDI from
USA to Vietnam in 03 major cities (Hanoi, Danang, Hochiminh city). The investment
environment includes investment environment in the host countries, investment environment in
domestic country and international investment environment. The Dissertation focuses on the
factors of investment environments to which the Government has heavily influenced, including:
environmental policy, law, administrative procedures; economic environment; infrastructure and
human resources.
Significance of study
The basic arguments of FDI theory, investment environment, and influent factors will be
clarified. The contents are: definition or concepts, characteristics, classification, elements of the
investment environment. In addition, the Dissertation points out some international experience

of some countries about the improvement of investment environment in order to enhance FDI
attraction in Vietnam.
Chương 2
REVIEW OF LITERATURE AND RELATED STUDIES
1. FOREIN DIRECT INVESTMENT (FDI) THEORY
1.1. Concept and features
1.1.1. Concept
FDI is the type of movement of capital between countries, in which the capital owners is
both direct management and operation of capital use. The FDI is considered under following
assessments: First, in consideration of the ownership aspect; Second, in consideration of property
flow aspect; Third, in consideration of activity scope:
1.1.2. Features
Foreign direct investment is the type of international investment, in which a foreign
investor distributes capital to build or buy (in whole or in part) the business establishments in
foreign countries and become the owner property that manages, operates or participates in the
operating management of the establishments.
1.2. FDI classification
1.2.1. Joint – venture company
This is a form of international business organization in which participants have different
nationalities between home country’s investors and the rest of the foreign partner. This form is


characterized by new enterprises established under the laws of the host country, having a legal
entity under the laws of the host country, the partners have different nationalities contribute
capital, and manage business activity, distribute profit, and share risks together.
1.2.2. Enterprise with 100% foreign capital
This form is the preferred foreign investment and is expanded in international economic
relations as their own decisions, and management to get benefit from investing activities.
1.2.3. Business cooperation contract
This is a form of joint venture between a local partner with foreign investors and

characterized by a contract signed that presents an agreement to conduct one or more business
activities in the investment countries, based on clearly defined objects, business content,
obligations, responsibilities and division of business results for the partners without setting new
entity.
1.2.4. Other forms of FDI
In practice, FDI is also implemented under these other forms: BOT ( Build – Operate –
Transfer); Build - transfer - business contracts (BTO); Build - transfer contracts (BT); Build transfer contracts (BT); Public Private Partnership (PPP);
1.3. Roles of foreign direct investment
1.3.1. Impact of FDI on investors and investor’s country
a) Positive impacts
- Improve efficiently capital use
- Restructure the national economy towards a modern and more efficient orientation.
- Avoid trading or non-trading protection.
- Increase business profits through "transfer pricing".
- Is risk diversification for investors due to economic conditions, domestic political
instability.
b) Negative impacts
- If the Governments of the investment exporting countries does not have appropriate
investment policies in the domestic countries; this will encourage the attention of foreign investment
over domestic investment to higher profitability. Meanwhile, the domestic economy could fall into
recession, political and social instability...
- Foreign investors may be risk of economic policy, politics, society ... of the investment
receiving country.
1.3.2. Impact of FDI on investment receiving country
a) positive impacts
- FDI contribute to the increase in capital investment, technology ... and promote
economic growth and development.
- Technology transfer, economic management experience:
- Create jobs, raise living standards and quality of human resources:
- Expand markets, promote exports of goods

- Promote economic restructuring
- Contribute to increasing national budget and improving trade balances
b) Negative impacts


- The phenomenon of "transfer pricing" is quite common in foreign direct investment.
- Causing some imbalance and instability in the investment
- Causing negative result of labor and finance in the investment receiving country
- May be introduced by the outdated technology
- Increase the risk of bankruptcy of local economy and traditional industries, increase risk
of competitive inequality.
- It is losing more jobs from the traditional manufacturing industries and being not
properly respected to training for employees
- Negatve impact on the environment and natural resource over-exploitation
- Is the risk of money laundering
2. OVERVIEW OF INVESTMENT ENVIROMENT
2.1. Concept
The concept of the investment environment has been studied and reviewed by many
different aspects depending on the purpose, scope and subjects of research.
2.2. Characteristics of the investment environment
2.2.1. Synthetic feature
The investment environment is the sum of factors. The investment environment factors
affect not only on an investors or on all investors in a certain locality, but also impact on other
objects (customers, suppliers, employees ...) and to the entire economy.
2.2.2. Mobile (dynamic) feature
The investment environment is always dynamic or mobile, changeable due to movement
and change over time of components constituting the investment environment. The elements of
the investment environment as well as their mobilization affect investment activities in general
and activities of foreign direct investment in particular the investment
2.2.3. Openness feature

The openness of the investment environment has expressed the changes of elements of
the investment environment; it is also affected by the higher level investment environment. The
movement of the elements of the provincial investment environment affected by the national
investment environment, and the elements of national investment environment is influenced by
the international investment environment, particularly in the context of international economic
integration at present.
2.2.4. Systematic feature
Investment environment has systematic feature because the investment environment is a
sum of factors interacting with each other and being affected by international investment
environment. However, the national investment environment is a special system for itself
because it consists of many smaller systems.
2.3. Classification of investment environment
2.3.1. Classification by national management function
The elements of investment environment are divided into 2 groups: Group of strong powerful
governmental element and group of less powerful governmental element: input price due to the
market impact; natural features of a nation, disaster ....
2.3.2. Classification by channels of factors affecting investment activity


The factor of FDI investment environment is divided into 03 groups: Factors affecting
costsb; Factors affecting risk; Factors affecting competition
2.3.3. Classification by constituent elements
The overall investment environment includes particular investment environments
following: Natural Environment; Political environment; Law environment; Economic
environment; Social and cultural environment.
2.3.4. Classification by scopes
In a country, the investment environment can be devided into National investment
Environment, Regional Investment Environment and Provincial Investment Environment.
2.3.5. Classification by phases of formation and investment activities
FDI environment includes the following elements: Factors approaching investment

market; Factors related to operating process; Factors related to the end of investment activity
2.3.6. Classification by causes for capital flows
- Push factor: The elements belong to the investment environment of the investment
exporting countries.
- Drag factor: The elements belong to the investment environment of the investment
receiving countries.
3. IMPACT OF INVESTEMENT ENVIRONMENT ON FDI ATTRATION
3.1. Factors from investment environment in the host country countries
3.1.1. Natural environment
The natural environment includes natural factors such as geographical location,
topography, climate, natural resources ... of a given area.
3.1.2. Politic environment
The stable political system ensures the Government's commitment to the investor about
the capital property, the investment incentives and the development orientation. This factor
specifies level of assets risk and business activities of investors.
3.1.3. Law and policy environment
FDI activities relate to many organizations and individuals and are conducted for a long
time. So the legal system of a country must ensure the following elements:adequacy and
synchronization of the legal system; the ability of law implementation: working in the countries
abroad with large amount of property, investors must rely on the laws of host countries to ensure
their interests; administrative procedures; the preferences and restrictions given to investors by
the legal system; Transparency, fairness, openness and stability of the legal system
3.1.4. Economical environment
The economic environment reflects the level of economic development of a country, and
may affect the attraction and effective use of FDI investors.
3.2. Factors from invironment in investor’s countries
3.2.1. Macroeconomic policy
- Financial and monetary policies
- Foreign exchange management policy
- Import and export policy

3.2.2. International legal for oversea investment
- The bilateral and multilateral investment agreements
- The double taxation avoiding agreements
- Help for investment promoting activities
- Insurance policy for capital investment
3.2.3. Economic, scientific and technological potential
- Economic potential: if the economy of a country has high accumulation capacity and
high levels of foreign currency reserves, the country has greater demand for foreign investment
to exploit effectively excess capital
- The level of research, scientific and technological development
3.3. Factors from international investment environment
3.3.1. General trend of cooperation between regions and countries
The trend of increasing cooperation between the countries and territories will limit
military confrontation; promote the expansion of economic relations between the countries and
territories. These are important conditions for investment liberalization.
3.3.2. General trend of regional lingkage and globalization
The trend of globalization also promotes international financial markets, which impacts
strongly on FDI movements. This effect is expressed by: reducing the financial institutions for
international capital flows, extending the application of technology to create favorable conditions
for trading business of financial markets.
3.3.3. Establishment and development of transnational companies
FDI activities are mostly implemented by the TNCs so the establishment and
development of TNCs will impact significantly on FDI flows movement. TNCs include the
parent and subsidiary company in countries around the world.
4. ATTRACTING FDI EXPERIENCE WORLD-WIDE
4.1. Attracting FDI experience of some countries
The desertation explained FDI experience of China, Malaysia, Thailand and Singapore
4.2. Experience for Vietnam

- It is needed to determine the right content to attract FDI in each stage of socio economic
development of the country.
- It is required to ensure security for political, social and economic stability environment
and to enhance the role of state management.
- Improve open legal system
- Focus and concentrate investment in economic infrastructure in order to create a
favorable investment environment for foreign investors.
- Simplify administrative procedures, investment process
- Strengthen the financial services and supporting services to attract FDI.
- Improve the quality of human resources to meet social requirements.
4.3. Role of FDI on socio-economic development in Vietnam
- Enhancement of investment capital
- Promotion of economic structure transfer, work creation for employee
- Creation of industrial and export values and GDP growth contribution


- Contribution of infrastructure and techniques forming for the industrialization and
modernization process
- Contribution of national budget increase
5. REVIEW OF RELATED STUDIES
The author reviewed above 20 studies on foreign direct investment and investment
environment in Vietnam and in the world. Most of the studies focused on studying the situation of
FDI attraction in a country, region, at a local area of a nation; role of FDI to the invested countries,
investment countries; and investment environment factors affecting FDI attraction.
6. CONCEPTUAL FRAMEWORK
It is the relationship between environmental factors in attracting FDI of a host country
including five factors in the folloing Figure 1. Framework of the research:

FDI environment
of Vietnam as

host country

FDI in the three
major cities of
Vietnam:
1. The US
Investors
2. The US FDI
enterprises
3. The FDI
Governmental
Administrator

Factors
1. Politic,
2. Governmental
administration,
3. Location,
4. Economic and financial
mechanism,
5. Labor

International FDI
policies of the
United State

Determination of
the US invertors
1. Remaining
investment

2. Extending
projects
3. Encouraging
other investors


CHAPTER 3
METHODOLOGY
1. RESEARCH DESIGN
Step 1: Clarify the issues to be studied
Step 2: Study theorical results of foreign direct investment attration
Step 3: A qualitative study
Step 4: The synthesis , analysis, comparison are used
Step 5: Quantitative research uses multivariate regression models
2. LOCATION OF THE STUDY
- Departments of Planning and Investment (Hanoi, Ho Chi Minh city, Da Nang).
- Foreign Investment Agency – Ministry of Planning and Investment
- FDI enterprises in the 03 provinces.
The data is collect in period of time from 1988 to 2012.
3. DESCRIPTION OF RESEARCH POINTS
A five-point Likert scale was used for the scoring indicators of 5 indicators. The results
obtained from the questionnaire were entered into SPSS spreadsheet.
Table 1. Factors affecting the FDI
FACTORS

GROUP

Political environment affects to attracting FDI from the US (POE)
Governmental administration affects to attracting FDI from the US (GAE)
Location factor affects to attracting FDI from the US (LOE)

Economic -financial mechanism affects to attracting FDI from the US (EFE)
Labor affects to attracting FDI from the US (LAE)

Vietnam FDI
environment affects
to determination of
the US invertors
(FVE)

A model is basing on five indicators in the Table 1 and it is estimated as following model:
FVE(y) = β0 + β1POE + β2 LOE+ β3 EFE+ β4 LAE + α
4. SAMPLE SIZE AND SAMPLING TECHNIQUE
To determine the number of enterprises in research should examine this Dissertation
Slovin formula used is as follows: n =

N
1 Ne 2

where n : number of samples to be surveyed
N: total business of foreign direct investment in three areas
e: Standard error of sampling
Due to surveyed enterprises are placed on vast areas, so it is very difficult to access them.
On other hand, the surveyed time and cost are limited, so the Dissertation should be using the
error standard in this survey is 10%.
Thus, the minimum sample size to conduct the investigations would be:
n=

N
1 Ne 2

7032
1 7032 * (0,1) 2

98,59

99

(Enterprises)

The numbers of samples were selected in the area, respectively: Hanoi: 99 * 29.3% = 29;
Da Nang: 99 * 11.1% = 11; Ho Chi Minh City: 99 * 59.6% = 59


5. DATA COLLECTION PROCEDURE

Survey research was studied or conducted through articles,
scientific reports, essays...

Get officers experts who are experienced in FDI by submitting a preliminary
questionnaire

Send a formal questionnaire to the investors, FDI enterprises and FDI
governmental agencies

Collecting qualitative data for the
factors from the questionnaire

Collecting quantitative data from
statistic agencies and legal system

Discuss and evaluate the impact of these
factors work to attract the US investors

Find out the relationship and affection of
these factors to the US FDI in Vietnam

Conclusions and Recommendations

Figure 2. Data collection process
6. STATISTICAL ANALYSIS
1. Average value and comparative value method
2. Frequency scale for 05 factors
3. ANOVA statistic to find out discrepancies between 03 areas
4. Using the correlation coefficient (r) to perform statistic.
5. Apply model of regression linear – correlation.


CHAPTER 4

RESESULT AND FINDINGS
1. RESEARCH BACKGROUND - AN OVERVIEW OF FDI ENVIRONMENT IN
VIETNAM AND THE UNITED STATE
1.1. General investment environment of Vietnam
1.1.1. Politic environment
Vietnam is ranked as one of the stable political countries in the world
1.1.2. Geographic and Infrastructure environment
Vietnam has a favorable geographical location for economic and social development in
general, for attracting foreign investment in particular. High rate of investment in Vietnam
resulted in rapidly expanding volume of infrastructure and improving access and contributed to
the successful growth and development of the country.

1.1.3. Economical and Financial Environment
Since the implementation of reforms, Vietnam has been a great achievement in
economics. Vietnam maintains continuous economic growth; the average growth is ranked in
the high growth economies in the region and around the world. However, macroeconomic
instability in recent years has negative impact on attracting foreign direct investment.
1.1.4. Institutional and Administrative Management environment
Right from the start of implementation of open innovation policy, the Party and State of
Vietnam was interested in the reform of administrative procedures and have been specified in
the Resolution of the Communist Party of Vietnam.
1.1.5. Labor environment
Human resource of Vietnam is important factor having a positive impact on FDI
attraction because of the abundant labor force, low costs, and increasing labor skills over the
years.
1.2. Trend of FDI attraction in Vietnam
1.2.1. Economic growth forecast for Vietnam
When world economy would continue to recover in the future, Vietnam economy shall
continue to grow and its structure shifts positively.
1.2.2. Comments about FDI from the U.S in Vietnam during 2013 – 2020
The total investment
FDI from the United States in Vietnam will rise again in 2013, and will grow rapidly
after 2015. It is derived from the many causes which are explained clearly in the dissertation
1.3. Policies of the U.S on abroad investment
1.3.1. Summary of the United States
In general, direct investment abroad by U.S. was controlled mainly by the international
bilateral and multilateral legal set by the United States (early years of the 19th century). In the
framework of bilateral cooperation, the U.S. government signed treaties under 3 types,


including treaties of friendship, commerce and navigation (FCNs); bilateral agreements on
investment (BIts); Agreement of activities of Overseas Private investment Corporation (oPIC).

1.3.2. Practice of FDI from the US in Vietnam
After the establishment of formal diplomatic relations, the United States has always
been one of the ten largest countries investing in Vietnam, especially in 2009: United States has
become the largest investor in Vietnam with a total registered capital of $ 9,805,824,270,
accounting for 44.7% of FDI inflows into Vietnam.
2. RESULTS OF SURVEY ON FDI ENVIRONMENT IN VIETNAM
2.1. Foreign Enterprise’s Assessement
2.1.1. Process of receiving a project under OSS (One-Stop-Shopping) mechanism
There are 55.2% of the interviewees said that the OSS mechanism to receive a project in
Vietnam is not favorable, so it is needed further reform of administrative procedures to attract
foreign investment.
2.1.2. Infrastructure
There are 42.5% of the interviewees said that infrastructure of Vietnam is in the normal
range and 28.7% complained about infrastructure.
2.1.3. Investment supporting policy
Most enterprises tend to appreciate the policy supporting for electricity supply 24/24
(70.1% of opinions), supporting for electricity and water to the construction (71.2%), and
ensuring of skilled labor supply (71.2%).
2.1.4. Rapid work clearance
Most of enterprises consider that the work clearance in Vietnam is very weak (79.3% of
opinions). Thus, in order to attract foreign investors, the local and state administrators must
have solutions to improve the work clearance activity.
2.1.5. Ensurement of supplying raw materials, supporting industries
Only 27.6% enterprises indicated that the ensurement of supplying raw materials,
development of supporting industries to provide components, details of equipment, machinery
… is favorable, and 72.4% think this work is not favorable. Therefore, policy should focus on
attracting investment in a synchronous manner.
2.1.6. Review of foreign investors about the attractiveness for FDI
To attract FDI, interviewed foreign investors took interest in water supply quality
(50.9%), water, electricity supply quality (20.6%), water and waste treatment (25%), Inside

industrial zone infrastructure (32%), outside industrial zone infrastructure(17%), trained labor
recuitment potential (22%), lower labor costs (41%), tax and other incentives (17%), ability of
ancillary industries (13%). They also indicate that attitude of local civil servant is generally very
low (16%). These infos represents the investment environment in Vietnam is less attractive to
investors.
2.2. The State administrator’s assessement
2.2.1. Politic evironment
Vietnam agencies were quite highly appriciated the politic environment. However,
36.66% said that the policy of Vietnam is not transparent (where as 33.33% of respomdent is


disagreed and 3.33% of respondent is strongly disagreed). Therefore, it is a barrier to the
process of attracting foreign investment in Vietnam.
2.2.2. Institutional and management environment
Vietnam agencies were not appriciated the management and institutions environment as
it is not professional. Proportion of disgreed opinion was high rate.
2.2.3. Geographic and infrastructure environment
Geographical location and infrastructure of Vietnam were not appreciated, especially for
transportation (40%) and water (40.3%).
2.3. Foreign investor’s assessement
The dissertation use almost secondary data to research the FDI enterprise’s
assessment and the State administrator’s assessement. But primary data is used to research the
FDI investor’s assessment.
2.3.1 Evaluating the reliability of statistic data
In order to evaluate the reliability of scale, the Dissertation uses coefficient of
Cronbach’alpha. The Cronbach’s Alpha is used to test the reliability of variables before using
statistic software. Coefficient correction of all variables is at standard of above 0.3 and the
Cronback’s Alpha value is higher than 0.6. For example, The Cronbach’alpha of "Political
system" variable is 0.758 and the Total correlation is higher 0.3.
2.3.2. Descriptive statistics

The results show that the mean value of almost variables are higher than 3. This explains
that the US investors are thinking that environment factors are in good terms. However, the
labor variable has the lowest mean of 2.9899. It shows that Vietnamese labor factor does not
meet demand of the US investor.
2.3.3. ANOVA analysis
This Dissertation uses ANOVA to find out difference in evaluating of investor on each
investment regions, which is combined the Post Hoc Tests to analyze the discrepancy between
each group. When the US investors evaluate there is difference between regions, it shall result
to alpha coefficient below 0.05 complying with Sig. value <0.05.
2.3.4. Hypothesis Testing
This Dissertation uses the correlation coefficient (R) to test the hypothesis pairs, which
have been proposed in Chapter I. The analytical results presented in Table 27 show that, all
hypothesis are accepted.
2.3.5. Factor analysis on regression model
The analytical results show that the level of significance of the test is accepted in all above
models because F-test values are less than 0.05. The best linear regression model is chosen in
this study is:
FVE = - 2.836 + 0.394 POE + 0.780LOE + 0.602 LAE
In the Model, the coefficient of the regression factor "Geographical and infrastructure" is
the highest value (0.780). It indicates that this is the variable, which strongly influences the
investor's determination of the US enterprises. The less influential factors are the "Labor
environment" (regression coefficient is 0.602) and factor of "Political environment" (coefficient


regression is 0.394) are the elements that influenced at lowest level to the US investor's
determination.
CHAPTER 5
CONCLUTIONS AND RECOMMENDATIONS
1. CONCLUSIONS
First, there is the political environment that continueosly assure that Vietnam wants to

attract more foreign investment. There process of policy initiatives continues to ease the
difficult conditions for FDI projects and to approach a level playing field of regulations for
business operation between FDI enterprises, SOEs and private firms. The Author found there is
often a long process between the announcement of policy initiatives and the actual
implementation of the measures to be effective in the politic system. At the political assessment,
there might find more liberal economic conditions including FDI that is seen as guaranty for
stability and equity. The related bureaucracy is not yet really completed by reducing the number
of added permissions: sub-licenses, approvals, licenses, etc in attracting FDI. The
correlationship and coefficient of political factor are recorded in the regression linear Model in
this disertation show that is effected level after location and labor, but is very important in
general FDI environment.
Second, the result also confirm and specify the disadvantages of Vietnam in FDI
environment. The US investors were much concerned with the investment environment in a
sense that it lack of administrative transparency and consistency, the administrative and customs
procedures are bureaucracy, corruption and bribes are common in the governmental agencies
and taxation sector. Noticeably, the US investors were somewhat worried about the institutional
regime in Vietnam, in which all the socio-economic development directions are effected by
SOEs. Referring to the negative factors of Vietnam, the Dissertation suggests that the situation
of domestic market, transparency of investment environment, simplification of administrative
procedure are poor in Vietnam. In these aspects, Thailand and Malaisia is considered more
advantageous than Vietnam to attract the US investors with complete open market mechanism,
better provision of raw materials and intermediary goods for production. These countries
perform a little better than Vietnam in administrative procedure simplification and transparency
of investment environment. The research indicated that the US enterprises were very
disappointed with the administrative procedure in Vietnam.
Third, the geographical distribution of FDI in Vietnam is characterized by concentration
in the key economic cities and provinces: Hochiminh city in the South, Danang City in the
Middle and Hanoi city in the North of Vietnam. These cities are very good infrastructure. Thus,
the regression linear Model also indicates that geographical enviroment is the most important
determinant to attract foreign investor. The Chapter 4 of this indicates that geography plays a

direct and essential role in promoting FDI through many channels including human resource,
infrasture, physical location and infrastructure. It is concluded that geographical conditions
could directly influence the FDI attraction from the US through the availability of natural


resources as well as enabling to access Vietnam infrastructure system such as international port
or commercial routes.
Four, openness to domestic market to foreign investors makes the precondition for FDI
movements of inflow from the US, which can be regarded as the contribution of total economic
and finance conditions. Almost of the US investor prefer to establish new subsidiary companies
in Vietnam if it is more open investment environment. Because the imperfections of open
economic and finance, e.g. trade protection, will lead to rising transaction costs, which shall not
attract more the US investors on maintaining business, expanding business or introducing new
investor into Vietnam. The Dissertation shows that after opening the "door" to foreign
investors, the US investor have been increasing investing capital much more in Vietnam.
Fifth, labor factors play an important role in the locatiing decision of FDI, and being
measured by the worker's skill, cost of labor (the salary and wage paid to the employees).
Consequently, Vietnam, a country overall developing country with lower general wage everage
level is expected to continually attract foreign investment from the US. The result of this study
reveals the strong motivation of the US investors chose investing location in Vietnam, which is
a developing and emerging economy with a large potential with low cost of labor, good
incentive FDI policies. This result is consistent with author's expectation that labor factor of
Vietnam is competitiveness to attract more the US investors due to lower cost of training. In
choosing many options, foreign investor shall be forced to increase their budget for labor cost.
Vietnam has emerging economy market for FDI in the last years, attracting both international
investors and continues to attract significant from the US. Because Vietnam is undergoing a
rapid transition to a market driven economy in a region of great competitiveness such as Hanoi,
Danang and Hochiminh City. Out of the author’s expectation model, Vietnam labor affecting to
FDI environment is positively associated with FDI inflow, revealing a mixed relationship
between labor factors and FDI inflow in the context of Vietnam. In considering the US

investors' determination, the labor element is strong effecting to their maintaining their
investment in Vietnam. However, in the regression linear model, labor element is just effecting
level lower than the geographical and infrastructure elements.
2. RECOMMENDATION FOR ATTRACTING THE U.S FDI
2.1 Shorterm solutions
2.1.1. Politic environment
In oder to maintain political - social stability, it is required to promote democracy by
creating mechanisms to fulfill the people's sovereignty, espectially direct democracy in order is
to strongly promote all creative possibilities and ensure consensus in society, create incentives
to develop the country. On other hand, it is required to develop independent economy in the
context of increasing and deeper international integration; develop internal resources and
national strength is the deciding factor, and enlist external power and strength era is an
important factor for the rapid, sustainable development and independent economy construction.
Strengthen continuously economic potential and trength synergy of the country for positive,
proactive international integration.


2.1.2. Institutional- Administrative Management
In the process of improving the policy environment, the law should clearly identify the
socio-economic benefits of Vietnam to attract foreign investment. In addition, attention should
be paid to the systematics of investment environment: To ensure uniformity, consistency of
legal documents, to avoid overlap between the legal documents, in accordance with
international commitments Vietnam has participated; to ensure openness and transparency in
the legislative process and law enforcement. Vietnam needs to continue to improve policy and
law environment in the coming time which are also indicate in detailing in the Dissertation.
2.1.3. Geographic- Infrastructure
FDI inflows tend to shift in favor for East Asia, including Vietnam, if timely capturing
and having consistent mechanisms. Some investors began to shift direction from China to other
countries in the region to reduce risks and costs due in part to China's rising wages. ASEAN and
China becoming a free market also contributed to reinforce the policy to transfer a portion of the

production facilities of FDI enterprises from China to ASEAN countries. Vietnam has economic
advantages, located in the market of 1.2 billion people (600 million people in South China and
600 million people in the ASEAN region), convenient connection with the ASEAN countries
and the southern provinces of China both by air, sea and road. If infrastructure is more
developed, Vietnam will have better chance to become a hub for supply of goods to the area of
transnational corporations, FDI enterprises.
2.1.4. Economic- Finance
In recent years, Vietnam's economy is most affected by the impact of the global
financial crisis, global economic downturn and the unfavorable global economics, many
indicators of macroeconomics is reduced, which affect the FDI attraction and disbursement as
well as the efficiency of FDI projects. The FDI enterprisess considered unstable economic
factors causing major obstacle to investment, costs increase and causing risky business. The fact
that, the Vietnamese government requires to ensure macro-economic stability to enhance
effectively FDI attraction.
2.1.5. Solutions related to human resources
Nowadays, many advantages in terms of labor, cheap is not as before, but expectations
of investors is high quality human resources. To improve the quality of human resources to
meet the needs of businesses and job security for workers, it need to perform the following
contents:
First, basing on the development plan, area, it requires to determine manpower needs for
the entire economy, from 5 years to 20 years.
Second, determining the structure of each labor type including managers, engineers and
skilled labor.
Third, developing a system of schools, vocational colleges and universities; invest in
upgrading and developing the training to regional and the world level to meet the labor demand.
Forth, performing socialization training. Funds for training should be diversified,
including the cost of education, business and government budgets. Besides, conduct theory
training in the school combined with practical training in enterprises.

Fifth, ensuring the interests of workers and enterprises, it need to improve the law and
policies on labor, wages which match the change in the economic environment in the country
and the world. Enhancing the support and supervision of the observance of labor laws to ensure
working conditions and remuneration for employees.
2.2. Longterm solutions
2.2.1. Promote the development of supporting industries
According to research by the Research Institute for Industry Policy and Strategy, the 100
enterprises engaged in the manufacture of the final product in the chain, there has 95 enterprises
which perform operations based on the development of supporting industries, only 5 assembly
enterprises. Currently in many industrial sectors, the enterprises, due to the lack of a system of
auxiliary enterprises, have to depend on imported inputs and almost stand outside the global
supply chain. Therefore, the State should have policies to encourage investment in the
development of supporting industries, attracting the participation of all economic sectors in the
country and abroad, encouraging the formation of industrial zones for component, spare parts
manufacturer, auxiliary materials (for FDI enterprises, particularly FDI enterprises using hightech, complex products, including more components that requires a link between phases,
departments, businesses to create products; limiting details, that make up a product, to be
imported and heavily dependent on foreign suppliers. This may lead passive cause for FDI
enterprises, it also creates higher production costs due to the cost of traffic during the import of
components or parts which are not produced in the country); the domestic industry is
increasingly integrated into the chain global value.
2.2.2. Continuing negotiation, conclusion and implementation of the Trans-Pacific
Partnership Agreement (TPP)
The Trans-Pacific Partnership trade Agreement was signed and implemented to create a
favorable and adequate legal framework to attract and promote investment activities of the
United States in Vietnam, particularly in the context of the United States is now reaching out to
other countries outside China to find reliable destination for direct investments. TPP will create
the actual possibility for Vietnam enterprises engageing in value-added chain of goods and
services worldwide with the active participation of U.S. enterprise. This is a strategic objective
to strengthen attracting foreign direct investment from U.S. firms.
2.2.3. Develop specific policies to attract capital and technology from the MNC

In order to promote and further develop FDI of the MNCs from the United States, which
have higher levels of development - original, advanced and modern technology, Vietnam has to
enforce some policies to attract FDI towards the following points:
First, adjusting policies to attract FDI by focusing on suitable business sector in
accordance with the transformation from the pattern width growth to depth economic growth.
Second, constructing a favorable legal basis for the transfer of technology; provide
specific incentives to encourage foreign investors to transfer technology in Vietnam to receive
advanced technology modern, "green technologies", "closed technology "; towards attracting
FDI in manufacturing technology.


Third, implementing special incentives for strategic investment partners (MNC's Top
500 for receiving original technology) with the commitment of the State.
2.2.4. Strengthening information and communication, policy and advocacy for the
country to invest overseas.
Continue to strengthen the external information, propagandize the guidelines and
policies of the Party and State for expatriates. Promote the VTV4 channel on cable systems;
Send books, newspapers, magazines ... in the country directly to the community and to provide
official information on all aspects of the country for oversea Vietnameses. Promote the
delegation of the nation abroad to contact advocacy, direct dialogue with the community,
including those who still have biases to better understand the situation of the country, all
policies of the Party and the State.
Continue to create favorable conditions and enlist highliest overseas resources in the
U.S. including economy, knowledge, technology ... to contribute to the industrial development
and modernization of the country with the main task: Support the operation of the Vietnam
Business Association abroad towards practice and efficiency; and expand the participation of
typical nationals in the unions and political organizations in the country; Build and complete
policies and implement measures to attract science and technology knowledge, management
knowledge of overseas Vietnanmese in the - key social development projects; and adopt
appropriate incentives to create favorable conditions for overseas Vietnamese to promote the

ability to contribute; establish mechanisms for regular exchanges for overseas being able to
comment on issues of national development.
PUBLICATIONS RELATED TO THE DISSERTATION
Nguyen Anh Tuan (2008). Situations and solutions to improve quality of high-quality human
resources. Journal of Industrial, 04/2008 ISSN 1859-3984. www.tapchicongnghiep.vn.
Nguyen Anh Tuan (2012). Attraction of direct investment from the U.S. to Vietnam: Status
and Solutions. Journal of Industrial, 06/2012 ISSN 1859-3984. www.tapchicongnghiep.vn
Nguyen Anh Tuan (2012). Some solutions to attract direct investment in our country -specific
from the U.S. Journal of Science and Technology No.10 - 6/2012 ISSN 1859-3585.

Nguyen Anh Tuan (2012). Some comments concerning the socialization of infrastructure
development capital in Vietnam according to the public-private model. Journal of Science and
Technology No.10 -06/2012 ISSN 1859-3585.
Nguyen Anh Tuan (2013). Ability improvement of FDI attraction in the agricultural sector and
rural region in Vietnam. Journal of financial No.4- 2013 ISBN-005-56. www.taptritaichinh.vn.